Saul Centers, Inc. Reports Third Quarter 2022 Earnings

Saul Centers, Inc.

Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands, except per share amounts)

September 30,
2022

December 31,
2021

Assets

Real estate investments

Land

$         511,529

$         511,529

Buildings and equipment

1,574,872

1,566,686

Construction in progress

285,810

205,911

2,372,211

2,284,126

Accumulated depreciation

(679,121)

(650,113)

1,693,090

1,634,013

Cash and cash equivalents

10,291

14,594

Accounts receivable and accrued income, net

58,682

58,659

Deferred leasing costs, net

22,221

24,005

Other assets

25,734

15,490

Total assets

$      1,810,018

$      1,746,761

Liabilities

Notes payable, net

$         969,109

$         941,456

Revolving credit facility payable, net

125,747

103,167

Term loan facility payable, net

99,344

99,233

Accounts payable, accrued expenses and other liabilities

39,169

25,558

Deferred income

25,887

25,188

Dividends and distributions payable

22,445

21,672

Total liabilities

1,281,701

1,216,274

Equity

Preferred stock, 1,000,000 shares authorized:

Series D Cumulative Redeemable, 30,000 shares issued and outstanding

75,000

75,000

Series E Cumulative Redeemable, 44,000 shares issued and outstanding

110,000

110,000

Common stock, $0.01 par value, 42,000,000 shares authorized, 24,001,546 and 23,840,471 shares issued and outstanding, respectively

240

238

Additional paid-in capital

445,456

436,609

Partnership units in escrow

39,650

39,650

Distributions in excess of accumulated net income

(268,451)

(256,448)

Accumulated other comprehensive income

3,063

—

Total Saul Centers, Inc. equity

404,958

405,049

Noncontrolling interests

123,359

125,438

Total equity

528,317

530,487

Total liabilities and equity

$     1,810,018

$     1,746,761

Saul Centers, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Revenue

(unaudited)

(unaudited)

Rental revenue

$             59,951

$             59,058

$       179,765

$           175,634

Other

1,136

1,198

3,759

3,351

Total revenue

61,087

60,256

183,524

178,985

Expenses

Property operating expenses

8,995

8,210

26,174

24,420

Real estate taxes

7,078

7,154

21,652

22,121

Interest expense, net and amortization of deferred debt costs

11,103

10,914

32,162

34,559

Depreciation and amortization of lease costs

12,195

12,467

36,899

37,852

General and administrative

5,555

4,626

15,988

14,234

Loss on early extinguishment of debt

648

—

648

—

Total expenses

45,574

43,371

133,523

133,186

Net Income

15,513

16,885

50,001

45,799

Noncontrolling interests

Income attributable to noncontrolling interests

(3,563)

(3,747)

(11,670)

(9,653)

Net income attributable to Saul Centers, Inc.

11,950

13,138

38,331

36,146

Preferred stock dividends

(2,798)

(2,798)

(8,395)

(8,395)

Net income available to common stockholders

$                9,152

$             10,340

$         29,936

$             27,751

Per share net income available to common stockholders

Basic and diluted

$                  0.38

$                  0.44

$              1.25

$                  1.17

Reconciliation of net income to FFO available to common stockholders and

noncontrolling interests (1)

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except per share amounts)

2022

2021

2022

2021

Net income

$              15,513

$              16,885

$             50,001

$             45,799

Add:

Real estate depreciation and amortization

12,195

12,467

36,899

37,852

FFO

27,708

29,352

86,900

83,651

Subtract:

Preferred stock dividends

(2,798)

(2,798)

(8,395)

(8,395)

FFO available to common stockholders and noncontrolling interests

$              24,910

$              26,554

$             78,505

$             75,256

Weighted average shares and units:

Basic

33,295

32,237

33,238

31,774

Diluted ⁽²⁾

34,005

33,656

33,957

32,877

Basic FFO per share available to common stockholders and noncontrolling interests

$                  0.75

$                  0.82

$                 2.36

$                 2.37

Diluted FFO per share available to common stockholders and noncontrolling interests

$                 0.73

$                 0.79

$                 2.31

$                 2.29

(1)

The National Association of Real Estate Investment Trusts (NAREIT) developed FFO as a relative non-GAAP financial measure of performance of an equity REIT
in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. FFO is defined by NAREIT as net
income, computed in accordance with GAAP, plus real estate depreciation and amortization, and excluding impairment charges on real estate assets and gains or
losses from real estate dispositions. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of
cash available to fund cash needs, which is disclosed in the Company's Consolidated Statements of Cash Flows for the applicable periods. There are no material
legal or functional restrictions on the use of FFO. FFO should not be considered as an alternative to net income, its most directly comparable GAAP measure, as
an indicator of the Company's operating performance, or as an alternative to cash flows as a measure of liquidity. Management considers FFO a meaningful
supplemental measure of operating performance because it primarily excludes the assumption that the value of the real estate assets diminishes predictably over
time (i.e. depreciation), which is contrary to what the Company believes occurs with its assets, and because industry analysts have accepted it as a performance
measure. FFO may not be comparable to similarly titled measures employed by other REITs.

(2)

Beginning March 5, 2021, fully diluted shares and units includes 1,416,071 limited partnership units that were held in escrow related to the contribution of Twinbrook
Quarter. Half of the units held in escrow were released on October 18, 2021. The remaining units held in escrow are scheduled to be released on October 18, 2023.

Reconciliation of revenue to same property revenue (3)

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

(unaudited)

(unaudited)

Total revenue

$              61,087

$              60,256

$           183,524

$           178,985

Less: Acquisitions, dispositions and development properties

—

—

—

—

Total same property revenue

$              61,087

$              60,256

$           183,524

$           178,985

Shopping Centers

$              42,478

$              42,485

$           128,615

$           126,935

Mixed-Use properties

18,609

17,771

54,909

52,050

Total same property revenue

$              61,087

$              60,256

$           183,524

$           178,985

Total Shopping Center revenue

$              42,478

$              42,485

$           128,615

$           126,935

Less: Shopping Center acquisitions, dispositions and development properties

—

—

—

—

Total same Shopping Center revenue

$              42,478

$              42,485

$           128,615

$           126,935

Total Mixed-Use property revenue

$              18,609

$              17,771

$             54,909

$             52,050

Less: Mixed-Use acquisitions, dispositions and development properties

—

—

—

—

Total same Mixed-Use property revenue

$              18,609

$              17,771

$             54,909

$             52,050

(3)

Same property revenue is a non-GAAP financial measure of performance that improves the comparability of reporting periods by excluding the results of
properties that were not in operation for the entirety of the comparable reporting periods.  Same property revenue adjusts property revenue by subtracting
the revenue of properties not in operation for the entirety of the comparable reporting periods.  Same property revenue is a measure of the operating
performance of the Company's properties but does not measure the Company's performance as a whole.  Same property revenue should not be
considered as an alternative to total revenue, its most directly comparable GAAP measure, as an indicator of the Company's operating performance. 
Management considers same property revenue a meaningful supplemental measure of operating performance because it is not affected by the cost of the
Company's funding, the impact of depreciation and amortization expenses, gains or losses from the acquisition and sale of operating real estate assets,
general and administrative expenses or other gains and losses that relate to ownership of the Company's properties.  Management believes the exclusion
of these items from same property revenue is useful because the resulting measure captures the actual revenue generated and actual expenses incurred
by operating the Company's properties.  Other REITs may use different methodologies for calculating same property revenue.  Accordingly, the Company's
same property revenue may not be comparable to those of other REITs.

Reconciliation of net income to same property operating income (4)

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2022

2021

2022

2021

(unaudited)

(unaudited)

Net income

$              15,513

$              16,885

$             50,001

$             45,799

Add: Interest expense, net and amortization of deferred debt costs

11,103

10,914

32,162

34,559

Add: Depreciation and amortization of lease costs

12,195

12,467

36,899

37,852

Add: General and administrative

5,555

4,626

15,988

14,234

Add: Loss on early extinguishment of debt

648

—

648

—

Property operating income

45,014

44,892

135,698

132,444

Less: Acquisitions, dispositions and development properties

—

—

—

—

Total same property operating income

$              45,014

$              44,892

$           135,698

$           132,444

Shopping Centers

$             33,652

$              33,845

$           101,513

$             99,848

Mixed-Use properties

11,362

11,047

34,185

32,596

Total same property operating income

$              45,014

$              44,892

$           135,698

$           132,444

Shopping Center operating income

$              33,652

$              33,845

$           101,513

$             99,848

Less: Shopping Center acquisitions, dispositions and development properties

—

—

—

—

Total same Shopping Center operating income

$              33,652

$              33,845

$           101,513

$             99,848

Mixed-Use property operating income

$              11,362

$              11,047

$             34,185

$             32,596

Less: Mixed-Use acquisitions, dispositions and development properties

—

—

—

—

Total same Mixed-Use property operating income

$              11,362

$              11,047

$             34,185

$             32,596

(4)

Same property operating income is a non-GAAP financial measure of performance that improves the comparability of reporting periods by excluding the
results of properties that were not in operation for the entirety of the comparable reporting periods.  Same property operating income adjusts property
operating income by subtracting the results of properties that were not in operation for the entirety of the comparable periods.  Same property operating
income is a measure of the operating performance of the Company's properties but does not measure the Company's performance as a whole.  Same
property operating income should not be considered as an alternative to property operating income, its most directly comparable GAAP measure, as an
indicator of the Company's operating performance.  Management considers same property operating income a meaningful supplemental measure of
operating performance because it is not affected by the cost of the Company's funding, the impact of depreciation and amortization expenses, gains or
losses from the acquisition and sale of operating real estate assets, general and administrative expenses or other gains and losses that relate to
ownership of the Company's properties.  Management believes the exclusion of these items from property operating income is useful because the
resulting measure captures the actual revenue generated and actual expenses incurred by operating the Company's properties.  Other REITs may use
different methodologies for calculating same property operating income.  Accordingly, same property operating income may not be comparable to those
of other REITs.